Indonesia’s Ministry of Trade is taking steps to further regulate e-commerce, announcing on Tuesday that the country does not permit transactions on social media platforms. This move is seen as a positive development for traditional e-commerce players in Indonesia, particularly Sea Ltd., amid the escalating competition between TikTok and Shopee, according to Citi.
President Joko Widodo has expressed concern over the decline in sales for micro, small, and medium-scale enterprises (MSMEs) due to the influx of foreign goods made available through social media channels. Consequently, the government aims to separate social media from e-commerce platforms to prevent the misuse of public data and protect customers’ privacy.
The ban on transactions on social media platforms means that users in Indonesia will no longer be able to buy or sell products and services on popular apps like TikTok and Facebook. The Ministry of Trade also plans to regulate which overseas goods can be sold, treating them the same as offline domestic goods. This is in response to the increasing availability of foreign products in Indonesia through social media platforms.
President Joko Widodo has called for social media regulations, emphasizing the platforms’ impact on local businesses and the economy. The restrictions are set to affect TikTok’s e-commerce ambitions in Indonesia, a country where it boasts a significant user base of 113 million, making it its second-largest market after the United States.
TikTok’s CEO, Shou Zi Chew, had previously announced the company’s plan to invest billions of dollars in Indonesia and Southeast Asia in the coming years. However, with the new regulations, TikTok’s e-commerce prospects in Indonesia appear to be at risk.
In response to the government’s move, a TikTok spokesperson stated that while they respect local laws and regulations, the company hopes the impact on the livelihoods of its sellers and creators is taken into account. TikTok believes that social commerce was created to address real-world challenges for local small sellers by partnering them with creators who can drive traffic to their online shops.
Investment bank Citi sees Indonesia’s regulations as advantageous for Shopee, the e-commerce arm of Sea Limited, as well as other domestic players. Citi predicts that any disruptions experienced by TikTok sellers during the transition period will likely benefit Shopee and traditional e-commerce platforms in the months to come.
As the Ministry of Trade moves forward with its plans to regulate e-commerce and limit transactions on social media, Indonesia’s e-commerce landscape is expected to undergo significant changes, impacting both local and international players in the market.